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Key tobacco court ruling not seen until 2006

November 16, 2005

By Brad Dorfman

CHICAGO (Reuters) – A federal judge in New York likely will
not rule until 2006 on whether a case that would let smokers
sue the tobacco industry over the promotion of “light”
cigarettes can move forward as a class action, attorneys said
on Wednesday.

U.S. District Judge Jack Weinstein issued a ruling earlier
this week that paves the way for him to make that decision. In
the case, tobacco companies are accused of conspiring to
defraud consumers into thinking that light cigarettes are safer
than regular smokes.

In an opinion issued on Monday, Weinstein found that
plaintiffs could use a method known as “fluid recovery” in
seeking damages in the case, which was brought forward under
federal racketeering law.

Fluid recovery lets damages in large class-action cases be
paid out in ways other than just giving cash directly to
plaintiffs, such as establishing a large pool of money that
could be used for public purposes.

“If he had ruled the other way on this, the case would have
pretty much been over,” Paul Gallagher, an attorney at Cohen,
Milstein, Hausfeld & Toll, who represents the plaintiffs, said
in an interview on Wednesday. “This lays the foundation, now he
has overcome in his mind a huge hurdle to class certification.”

SUMMER RULING?

Gallagher said it could be early summer before Weinstein
decides whether or not to let the case go forward as a class
action. If he does, smokers all over the country could seek
damages if the defendants lose, as long as the smokers’ claims
have not already been decided in state courts.

The case is similar to several state court cases in which
smokers are using consumer fraud laws to seek damages,
including a closely watched Illinois case in which Altria Group
Inc.’s Philip Morris USA unit was ordered to pay $10.1 billion
in damages. That case is on appeal to the Illinois Supreme
Court.

A lawyer for Altria stressed that Weinstein had not yet
decided on whether the multibillion-dollar New York case could
proceed as a class action.

“The idea that this allows this case to go forward, that
the judge removed a hurdle, is quite overstating” the ruling,
William Ohlemeyer, vice president and associate general counsel
for Altria, said in an interview.

DISAGREEMENT

He also said that the U.S. Second Circuit Court of Appeals,
which oversees Weinstein’s district in New York, has found in
the past that fluid recovery should not be allowed in this type
of case.

“Judge Weinstein is entitled to his opinion but I’m quite
confident the Second Circuit will disagree with him,” Ohlemeyer
said. He said Weinstein’s ruling was not something that could
be appealed until after a potential trial.

Tobacco stock analysts downplayed the importance of
Weinstein’s decision, though some said it was likely that he
would eventually allow the case to proceed as a class action.

“We believe this case will be less of an issue for the
industry if other lights cases are resolved favorably,” said
Bonnie Herzog, an analyst at Citigroup Investment Research. “We
do not believe this decision alone will have an impact on the
timing of the split-up of Altria.”

Altria management has said the company could be broken up
into two or three parts once several U.S. tobacco litigation
hurdles are cleared.

Defendants in the case include Philip Morris USA; R.J.
Reynolds Tobacco Co., which became part of Reynolds American
Inc.; British American Tobacco Plc; Loews Corp.’s Lorillard
Tobacco business; and Vector Group Ltd.’s Liggett Group.


Source: reuters



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